What is Active Income?
Usually active income refers to the income you may receive after performing a service. This may include wages, commissions, and tips. So, if you are an IT Consultant who works regular hours, as an employee, you will receive active income.
Active Income is usually the most predictable form of income. If you are the employee you receive the same regular wage (depending on your contract), and you will usually receive that pay on a regular date of the month. Many people grow up from childhood, through school and (sometimes) university with the dream of getting a regular wage. However, there may also be downsides of this. People earning a regular active income can become comfortable or may also start feeling trapped without the ability to make a massive change to their level of income. Now to compare passive income and active income.
Pro’s and Con’s of Active Income?
- The lowest risk form of income to you
- The most predictable income you can receive
- You can plan your use of money, and therefore eases budgeting
- Active income can limit your earning potential
- Could complacency creep in?
The most common types of income are active, passive, and portfolio.
What is Passive Income?
Passive Income can be derived from many different sources. At Passive Income Wizz we particularly look at finding new, awesome, and proven strategies of gaining passive income. The best way of explaining this is by quoting our Passive Income Wizz mission statement:
“Life is too short to work hard without reward. We aim to work smarter, not harder and free up more time to enjoy life. Our aim is to trial potential sources of good Passive Income, and grade them honestly. Some will be great, some will not be, some will require more time or skill than others. We shall find out!”
Outside of the ‘Passive Income Wizz world’, passive income is most commonly earned from rental property yield, or ANY activity in which a person is not actively involved. Ideally for us, passive income should be earned regularly with minimal effort on your part!
Other common sources of creating passive income include property, dividends, interest payments, online work, sports trading, financial trading. There are plenty more than this though!
Pro’s and Con’s of Passive Income?
- Can provide a significant bonus and/or replacement to your active income
- Certain strategies require minimal investment to start
- May be done in parallel to your regular active income
- The amount you receive may be very variable
- You may need to invest time and/or money to receive a return
- May require a long-term investment to see a return
Passive Income vs Active Income
There are clearly pro’s and con’s of both passive income and active income, and I hope you are starting to become clearer on what is passive income vs active income? I do not want to pretend that passive income will always be the magic bullet to a ‘millionaire lifestyle’. I never want anything as a ‘Get Rich Quick’ scheme.
However, there are many people who are VERY QUICK to shout down ANYTHING that is either outside of their comfort zone, or that they believe sounds “too good to be true”. This is very common, but at some point you have to take a leap of faith and try something IF you want to explore various sources of passive income.
I have heard people shoot down EVERY form of passive income for one reason or another. I have heard people shoot down:
- Stocks & Shares
- FX Trading
- Sports Trading
- Affiliate Marketing
- Amazon FBA
- Financial Trading
- Online Business
I can assure you that I know Millionaires in every one of those categories above, and more!
So, I hope that this article explains what is the difference between active income and passive income, and you understand the differences between them.
Regardless of active income and passive income types, I recommend that the best way to start exploring options to build your wealth is to maintain your regular active income (that most of us have) and then find one, or more, forms of passive income that you can start to add to this, with the intention of creating a source of passive income, initially as a side hustle!
Hope this helps!